Answer to Question #131280 in Macroeconomics for Kone mulalo

Question

Describe three ways in which government spending can be financed.

Answer 1

Solution:

The government can finance its spending through the following ways explained below:

1.     Government revenue collection – This is where the government generates revenue sales of its assets, income from government-owned companies, and through various tax collections from the public and corporate, which include income tax, corporation tax, sales tax and other taxes. The funds collected from the sale of assets, profits, and taxation are then used to finance its spending.

2.     Government borrowings – This is through debt financing where the government borrows from the public through issuing bonds and bills, including borrowings from international financial institutions.

3.     Government fees and charges – This is where the government levies fees and charges to certain goods and services to generate income.